The Reasons for the Rising Healthcare Expenses Explained!!

Rising Healthcare Expenses

When it comes to healthcare expenses, we all panic a little! A citizen of America spends a large chunk of money on healthcare every year. There are a number of expenses included in health and wellness that includes high insurance premiums and deductibles, copays, and various other out-of-pocket costs. 

One of the foremost reasons for rising healthcare expenses is government policy. With the establishment of government healthcare programs such as Medicare and Medicaid that are basically designed to aid people with no health insurance, providers have ended up increasing the prices. But this is not the only reason behind increasing healthcare expenses- there is more to it! 

So, let’s dig deeper and know how much cost the United States spends on health expenses as well as what are the factors that shape prices in this industry. 

Keep reading!!!

Overall Expenses of Healthcare 

Over the past several years, healthcare expenses have drastically spiked up in the United States. According to a recent study conducted by the JAMA, the total healthcare spending in the United States increased more than a trillion dollars between the years 1996 and 2015.

Also Check: How Much The Average American Spends On Health Care?

Furthermore, the study also reported that healthcare costs in the United States during the year 2017 was $3.5 trillion, or $11,000 per individual. And by the year 2027, all these expenses are also predicted to rise up to $6 trillion that is roughly $17,000 per individual.

This is when a question arises, where does all this money go? According to research, healthcare spending can be divided into a total of 11 categories:

  • Hospital care (32.7%)
  • Physician services (15.6%)
  • Other personal health care costs (15.1%)
  • Prescription drugs (9.5%)
  • The net cost of health insurance (6.6%)
  • Nursing care facilities (4.8%)
  • Investment spending (4.8%)
  • Clinical services (4.3%)
  • Home healthcare (2.8%)
  • Government public health activities (2.5%)
  • Government administration (1.3%)

Why Are Healthcare Expenses Spiking Up?

Healthcare Expenses Spiking Up

As mentioned earlier, the JAMA study examined how five key factors are affecting the rising healthcare cost over time. The 5 key factors are as follows: 

  • Population growth
  • Population aging
  • Disease prevalence or incidence
  • Medical service utilization
  • Service price and intensity

The researchers found and further stated that service price as well as intensity, including the rising expense of pharmaceutical drugs, made up over 50 percent of a spike up. There are several other factors that affect the rest of the expenses, which are varied by type of care as well as the health condition. 

Inefficiency & Lack of Transparency 

This is a serious factor! Due to a lack of transparency as well as underlying inefficiency, it is really challenging to determine & understand the exact expense of healthcare. 

Every other citizen of the United States is well-versed about the rising expense of, but due to insufficient details as well as complicated medical bills, it is not an easy task to analyze what a person is actually paying for.

The Wall Street Journal recently reported about a hospital that found it was demanding more than $50,000 for a knee-replacement surgery, which normally costs only between $7,300 and $10,550. In this case, if hospitals are unaware of the actual cost of a particular procedure, then patients are the ones who face difficulty shopping around.

And talking about the overall transparency, a survey conducted by NEJM stated that only about 17 percent of care professionals think that their institutions had either “mature” or “very mature” transparency.

Also Check: 5 Health Insurance Plans You Must Know About

Patients Avoiding Care 

This is yet another reason for increasing expenses that is all those people who intentionally skip medical care completely. And the reason they do that way is not that they have a fear for doctors, but because they are afraid of the hefty bills that are coming along with healthcare. 

A poll that was carried out by the West Health Institute and NORC at the University of Chicago concluded that 44 percent of American citizens refused to visit a doctor due to the expense concerns. And about 40 percent of the respondents revealed that they skipped numerous tests or treatments for the exact same reason. And in several cases, people who refuse the treatment have medical insurance.

So, all the aforementioned factors contribute to increasing healthcare expenses. Rising expenses for medical services affected by both a growing as well as the aging population also play a vital role. 

And so do various other factors including the increasing headcounts of chronic disease, rising expenses for outpatient & emergency room care, high premiums & out-of-pocket expenses. All these aspects are intensified by inefficiency as well as a lack of transparency in the world of medicine.